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Revenue Recognition
 9 Months Ended
Sep. 30, 2021
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

6. REVENUE RECOGNITION

 

Disaggregation of Revenue

The following tables disaggregate our revenue by major source for the quarters and years to date ended September 30, 2021 and 2020 (dollars in thousands):

 

 

 

 

For the Quarter Ended September 30, 2021

 

 

For the Quarter Ended September 30, 2020

 

 

 

CTU (4)

 

 

AIU (5)

 

 

Corporate and Other(6)

 

 

Total

 

 

CTU

 

 

AIU

 

 

Corporate and Other(6)

 

 

Total

 

Tuition (1)

 

$

98,730

 

 

$

65,101

 

 

$

-

 

 

$

163,831

 

 

$

93,071

 

 

$

67,394

 

 

$

-

 

 

$

160,465

 

Technology fees

 

 

5,339

 

 

 

2,962

 

 

 

-

 

 

 

8,301

 

 

 

5,085

 

 

 

2,439

 

 

 

-

 

 

 

7,524

 

Other miscellaneous fees (2)

 

 

278

 

 

 

185

 

 

 

-

 

 

 

463

 

 

 

290

 

 

 

192

 

 

 

-

 

 

 

482

 

    Total tuition and fees

 

 

104,347

 

 

 

68,248

 

 

 

-

 

 

 

172,595

 

 

 

98,446

 

 

 

70,025

 

 

 

-

 

 

 

168,471

 

Other revenue (3)

 

 

441

 

 

 

700

 

 

 

262

 

 

 

1,403

 

 

 

539

 

 

 

23

 

 

 

93

 

 

 

655

 

Total revenue

 

$

104,788

 

 

$

68,948

 

 

$

262

 

 

$

173,998

 

 

$

98,985

 

 

$

70,048

 

 

$

93

 

 

$

169,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year to Date Ended September 30, 2021

 

 

For the Year to Date Ended September 30, 2020

 

 

 

CTU (4)

 

 

AIU (5)

 

 

Corporate and Other(6)

 

 

Total

 

 

CTU

 

 

AIU

 

 

Corporate and Other(6)

 

 

Total

 

Tuition

 

$

294,058

 

 

$

209,722

 

 

$

-

 

 

$

503,780

 

 

$

284,826

 

 

$

204,943

 

 

$

-

 

 

$

489,769

 

Technology fees

 

 

16,352

 

 

 

8,630

 

 

 

-

 

 

 

24,982

 

 

 

15,367

 

 

 

7,729

 

 

 

-

 

 

 

23,096

 

Other miscellaneous fees (2)

 

 

959

 

 

 

509

 

 

 

-

 

 

 

1,468

 

 

 

985

 

 

 

514

 

 

 

-

 

 

 

1,499

 

    Total tuition and fees

 

 

311,369

 

 

 

218,861

 

 

 

-

 

 

 

530,230

 

 

 

301,178

 

 

 

213,186

 

 

 

-

 

 

 

514,364

 

Other revenue (3)

 

 

1,276

 

 

 

787

 

 

 

882

 

 

 

2,945

 

 

 

1,588

 

 

 

93

 

 

 

110

 

 

 

1,791

 

Total revenue

 

$

312,645

 

 

$

219,648

 

 

$

882

 

 

$

533,175

 

 

$

302,766

 

 

$

213,279

 

 

$

110

 

 

$

516,155

 

__________________

 

 

(1)

Tuition includes revenue earned for degree-granting programs as well as revenue earned for non-degree professional development and continuing education offerings related to the DigitalCrafts and Hippo acquisitions from the date of acquisitions.

 

(2)

Other miscellaneous fees include student activity fees and graduation fees.

 

(3)

Other revenue primarily includes contract training revenue and miscellaneous non-student related revenue.

 

(4)

CTU includes revenue related to the Hippo acquisition commencing on the September 10, 2021 date of acquisition.

 

(5)

AIU includes revenue related to the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition.

 

(6)

Revenue recorded within Corporate and Other relates to miscellaneous non-student related revenue.

 

Performance Obligations

Our revenue, which is derived primarily from academic programs taught to students who attend our universities, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our universities. Our universities charge tuition and fees at varying amounts, depending on the university, the type of program and specific curriculum. Our universities bill students a single charge that covers tuition, fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed to students. These fees are earned over the applicable term and are not considered separate performance obligations. We bill student tuition upon enrollment for our non-degree professional development and continuing education offerings and recognize the tuition as revenue on a straight-line basis over the length of the course.

Other revenue, which consists of contract training revenue, bookstore sales and miscellaneous non-student related revenue, is billed and recognized as goods are delivered or services are performed. Contract training revenue results from individual courses that are stand-alone courses and not part of a degree or certificate program. Bookstore sales are primarily initiated by the student and are not included in the enrollment agreement at the onset of a student’s entrance to the institution. Miscellaneous non-student related revenue consists of staffing services provided to third parties and software license fees. These types of sales constitute a separate performance obligation from classroom instruction.

Our institutions’ academic year is generally at least 30 weeks in length but varies both by institution and program of study and is divided by academic terms. Academic terms are determined by regulatory requirements mandated by the federal government and/or applicable accrediting body, which also vary by university and program. Academic terms are determined by start dates, which vary by university and program and are generally 8-12 weeks in length. Our non-degree professional development and continuing education offerings are generally 16-52 weeks in length.

 

 

 

Contract Assets

For each term, the portion of tuition and fee payments received from students but not yet earned is recorded as deferred revenue and reported as a current liability on our condensed consolidated balance sheets, as we expect to earn these revenues within the next year. A contract asset is recorded for each student for the current term for which they are enrolled for the amount charged for the current term that has not yet been received as payment and to which we do not have the unconditional right to receive payment because the student has not reached the point in the student’s current academic term at which the amount billed is no longer refundable to the student. On a student by student basis, the contract asset is offset against the deferred revenue balance for the current term and the net deferred revenue balance is reflected within current liabilities on our condensed consolidated balance sheets. For AIU’s Trident and DigitalCrafts programs and CTU’s Hippo programs, students are billed as they enroll in courses, including courses related to future periods. Any billings for future periods would meet the definition of a contract asset as we do not have the unconditional right to receive payment as the course has not yet started. Contract assets related to future periods are offset against the deferred revenue associated with the respective future period.

Due to the short-term nature of our academic terms, the contract asset balance which exists at the beginning of each quarter will no longer be a contract asset at the end of that quarter, with the exception of the contract assets associated with future periods. The decrease in contract asset balances are a result of one of the following: it becomes a student receivable balance once a student reaches the point in a student’s academic term where the amount billed is no longer refundable to the student; a refund is made to withdrawn students for the portion entitled to be refunded under each institutions’ refund policy; we receive funds to apply against the contract asset balance; or a student makes a change to the number of classes they are enrolled in which may cause an adjustment to their previously billed amount. As of the end of each quarter, a new contract asset is determined on a student by student basis based on the most recently started term and a student’s progress within that term as compared to the date at which the student is no longer entitled to a refund under each institution’s refund policy. Contract assets associated with future periods remain as contract assets until the course begins and the student reaches the point in that course that they are no longer entitled to a refund.

The amount of deferred revenue balances which are being offset with contract assets balances as of September 30, 2021 and December 31, 2020 were as follows (dollars in thousands):

 

 

As of

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Gross deferred revenue

 

$

92,087

 

 

$

85,402

 

Gross contract assets

 

 

(35,036

)

 

 

(50,868

)

Deferred revenue, net

 

$

57,051

 

 

$

34,534

 

 

Deferred Revenue

Changes in our deferred revenue balances for the quarters and years to date ended September 30, 2021 and 2020 were as follows (dollars in thousands):

 

 

For the Quarter Ended September 30, 2021

 

 

For the Quarter Ended September 30, 2020

 

 

 

CTU

 

 

AIU

 

 

Total

 

 

CTU

 

 

AIU

 

 

Total

 

Gross deferred revenue, July 1

 

$

77,818

 

 

$

43,649

 

 

$

121,467

 

 

$

28,092

 

 

$

39,725

 

 

$

67,817

 

Business acquisitions, beginning balance

 

 

3,952

 

 

 

1,404

 

 

 

5,356

 

 

 

-

 

 

 

-

 

 

 

-

 

Revenue earned from prior balances

 

 

(66,878

)

 

 

(32,623

)

 

 

(99,501

)

 

 

(25,035

)

 

 

(31,236

)

 

 

(56,271

)

Billings during period(1)

 

 

90,662

 

 

 

46,547

 

 

 

137,209

 

 

 

99,219

 

 

 

57,598

 

 

 

156,817

 

Revenue earned for new billings during the period

 

 

(37,469

)

 

 

(35,625

)

 

 

(73,094

)

 

 

(73,411

)

 

 

(38,789

)

 

 

(112,200

)

Other adjustments

 

 

951

 

 

 

(301

)

 

 

650

 

 

 

(777

)

 

 

(330

)

 

 

(1,107

)

Gross deferred revenue, September 30

 

$

69,036

 

 

$

23,051

 

 

$

92,087

 

 

$

28,088

 

 

$

26,968

 

 

$

55,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year to Date Ended September 30, 2021

 

 

For the Year to Date Ended September 30, 2020

 

 

 

CTU

 

 

AIU

 

 

Total

 

 

CTU

 

 

AIU

 

 

Total

 

Gross deferred revenue, January 1

 

$

28,522

 

 

$

56,880

 

 

$

85,402

 

 

$

27,845

 

 

$

35,359

 

 

$

63,204

 

Business acquisitions, beginning balance

 

 

3,952

 

 

 

1,404

 

 

 

5,356

 

 

 

-

 

 

 

13,395

 

 

 

13,395

 

Revenue earned from prior balances

 

 

(26,183

)

 

 

(46,020

)

 

 

(72,203

)

 

 

(24,376

)

 

 

(38,904

)

 

 

(63,280

)

Billings during period(1)

 

 

348,307

 

 

 

183,012

 

 

 

531,319

 

 

 

301,727

 

 

 

190,589

 

 

 

492,316

 

Revenue earned for new billings during the period

 

 

(285,186

)

 

 

(172,841

)

 

 

(458,027

)

 

 

(276,802

)

 

 

(174,282

)

 

 

(451,084

)

Other adjustments

 

 

(376

)

 

 

616

 

 

 

240

 

 

 

(306

)

 

 

811

 

 

 

505

 

Gross deferred revenue, September 30

 

$

69,036

 

 

$

23,051

 

 

$

92,087

 

 

$

28,088

 

 

$

26,968

 

 

$

55,056

 

______________

 

1)

Billings during period includes adjustments for prior billings.

Cash Receipts

Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment plans, employer reimbursement, Veterans’ Administration and other military funding and grants, private and institutional scholarships and cash payments, as well as private loans for our non-degree programs. Cash receipts from government related sources are typically received during the current academic term. We typically receive funds after the end of an academic term for students who receive employer reimbursements. Students who have not applied for any type of financial aid generally set up a payment plan with the university and make payments on a monthly basis per the terms of the payment plan.

If a student withdraws from one of our universities prior to the completion of the academic term, we refund the portion of tuition and fees already paid that, pursuant to our refund policy and applicable federal and state law and accrediting agency standards, we are not entitled to retain. Generally, the amount to be refunded to a student is calculated based upon the percent of the term attended and the amount of tuition and fees paid by the student as of their withdrawal date. In certain circumstances, we have recognized revenue for students who have withdrawn that we are not entitled to retain. We have estimated a reserve for these limited circumstances based on historical evidence in the amount of $2.3 million as of September 30, 2021 and December 31, 2020. Students are typically entitled to a partial refund until approximately halfway through their term. Pursuant to each university’s policy, once a student reaches the point in the term where no refund is given, the student would not have a refund due if withdrawing from the university subsequent to that date.

Management reassesses collectability when a student withdraws from the university and has unpaid tuition charges for the current term which the university is entitled to retain per the applicable refund policy. Certain unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue in accordance with ASC Topic 606 when cash is received and the contract is terminated and neither party has further performance obligations. We have no remaining performance obligations for students who have withdrawn from our universities, and once the refund calculation is performed and funds are returned to the student, if applicable under our refund policy, no further consideration is due back to the student. We recognized $0.3 million and $0.2 million of revenue for the quarters ended September 30, 2021 and 2020, respectively, and $1.2 million and $0.8 million for the years to date ended September 30, 2021 and 2020, respectively, for payments received from withdrawn students.